Lithium Americas gets down to business

Lithium Americas Corp., a private company being set up by Latin American Minerals (LAT-V) and an Argentinean borax producer, Los Boros, is trying to raise $1.575 million in a private placement to fund its lithium-potash salt lake project in northwestern Argentina.

Lithium Americas has begun process of listing on the TSX Venture Exchange and plans to have a National Instrument 43-101 report out in the next month.

The best efforts financing through Power One Capital Markets, is for 10.5 million shares at 15¢ apiece and will put Latin American’s interest in Lithium Americas at 32%. Board and management for Lithium Americas will consist of people from both Latin American and Los Boros.

The two companies had claims on neighbouring salt lakes – Latin American’s Cauchari salt lake is right next to Los Boros’s Olaroz salt lake. Together the properties cover 300 sq. km in the lithium salt brine district of Puna, Argentina. More than 90% of the world’s lithium brine reserves are spread across Argentina, Boliva and Chile. Lithium in salt brine, which must be pumped to the surface for processing, is usually cheaper to mine than hard rock lithium (spodumene) deposits.

Latin American’s president and CEO, David Wahl, says that this was the best way for the company to realize the upside potential of the project in the midst of the tough equity markets.

“We opted to take a property dilution rather than an equity dilution,” Wahl says.

For the property deal, Latin American will receive 8.4 million Lithium Americas shares, plus a $1 million interest-free promissory note, of which $300,000 is payable within 45 days, and the rest payable from subsequent Lithium Americas financings.

If Latin American keeps a minimum 10% equity interest in Lithium Americas it will have the right to maintain its pro rata equity interest. It will also have the right to reacquire its property after two years if Lithium Americas hasn’t become a publicly listed company.

For Los Boros’ Olaroz salt lake, Lithium Americas will have an option to acquire 100% of the subsurface brine salts on the Los Boros property if it spends US$3 million in exploration over the first three years, another US$3 million while advancing towards a feasibility study in the following tow years, plus yearly property payments of US$70,000 and a 3% net profit interest on commercial production.

Both Latin American and Los Boros will have the right to reacquire the property if Lithium Americas doesn’t become a publicly listed company within two years.

Latin American’s vice president exploration, Waldo Perez, was involved in the discovery the brines and is quite positive about moving the project forward.

He says that samples collected from Cauchari and Olaroz lakes have averaged around 800 parts per million lithium and 0.5% potassium.

“That’s one of the highest grades known in salt lakes,” Perez says.

In addition, Perez says the brines are low in magnesium – less than 10% — which is key for processing.

“Magnesium generates problems when you are trying to extract the lithium out of the brine,” Perez says.

Also of benefit to Lithium Americas is that the Olaroz salt lake is shared with an Australian company, Orocobre (ORE-A), which has recently completed a positive scoping study.

The study said found the average lithium grade was around 800 parts per million, similar to Latin Americas’ sampling, and that said a long-life operation producing 15,000 tonnes per year of lithium carbonate and 36,000 tonnes per year of potash could be constructed for US$80-100 million.

Perez says that Lithium Americas will begin a drill program in the next two months with the goal of a resource estimate by the end of the year on a budget of $3-5 million. During the first month, about 2,000 metres will be drilled initially, and but will follow up as it defines the location of the aquifers.

“The objective is to intersect the aquifer and pump the aquifer to quantify how much brine you can pump in a certain amount of time,” Perez explains.

Because the metal is dissolved in water, Perez says the reserves can be calculated relatively easily and quickly.

“What takes longer is to do the testing to estimate how you are going to produce all these brines,” he says.

Solar evaporation is used to precipitate the salts and then the salt is harvested, Perez says. The time consuming part is all the process studies done to determine how and when the evaporation process is done. This is the company’s plan for 2010.

Perez believes that a full feasibility study could be completed in less than two years, but for the moment, closing the financing will be the first order of business.